It’s always a pleasure to see changes that make a difference. In 2010, Arizona changed their R&D tax credit to be partially refundable making businesses located in their state more competitive both within the US and globally (See A.R.S 41-1507). In 2011, the Governor and Arizona legislature took it a step farther providing additional tax incentives for companies that made basic research payments to Arizona state universities (See HB-2001 – Arizona’s Competitiveness Package).
This time being proactive means tax refunds
As was the case last year when this program first began, Arizona has set aside $5 million to be refunded to businesses that generate a larger research tax credit than they need to eliminate their state tax liability. Companies have the opportunity to elect to receive 75 percent of their net research tax credit (after eliminating their Arizona tax liability) back in cash or carry it forward. Last year, the $5 million was exhausted in May. I would expect the fund to be exhausted sooner this year as the program becomes more widely known and utilized.
Ladies and Gentlemen, On your Mark!
At Acena Consulting, we are already scheduling to meet with our clients in December to complete much of the ground work needed to document their activities and calculate their research tax credit. When their books are closed in January, we will be able to complete our calculations and provide the final credit numbers to their CPA or tax preparer. More importantly, we will be able to finalize their packet and submit it to the Arizona Commerce Authority for approval of their refund.
How important is additional capital to your operation?
Can a tax reduction and check from the state help your business invest in additional capital equipment or additional employees to drive growth? The state is hoping that is the case. Whether your business can generate an additional $10,000 or $500,000 or more, the additional capital (and elimination of your state tax liability) can have an immediate and important impact to your business.
What should you be doing today?
If you are not already taking an R&D tax credit and think you might qualify (feel free to review our website pages and blog postings devoted to R&D tax credits), you need to speak with your CPA or tax preparer. You can always call us for a free consultation; we are happy to answer your questions regarding your activities, the R&D tax credit or Arizona refundable tax credit program. Either way, don’t miss out on an opportunity to grow your business and stay competitive.
What say you friends?What was your experience with this program last year? Have you assessed your eligibility for an R&D tax credit? Do you think this state program is important to Arizona’s economic growth?
Randy Eickhoff, CPA is President of Acena Consulting. With more than 20 years of tax and consulting experience, Randy focused on helping companies successfully document and secure tax incentives throughout the US. He has been a long-time speaker nationally as well as conducted numerous training sessions on R&D tax credits and other US tax incentives.
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R&D Tax Credits - Additional Information